Macro Week in Review/Preview January 27, 2017

Last week’s review of the macro market indicators noted that with the Inauguration and January Options Expiration in the rearview mirror, the equity markets held up very well and remained strong on the longer timeframe. Elsewhere looked for Gold to consolidate its uptrend or pullback while Crude Oil moved sideways in a range. The US Dollar Index looked better to the downside in the short run while US Treasuries were resuming their move lower.

The Shanghai Composite was stuck at 3100 and did not look to change that soon while Emerging Markets looked tired in their move higher and ready for a pullback. Volatility would remain at abnormally low levels keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts showed the QQQ remaining the short term leader as it crept to new all-time highs, while the SPY and IWM consolidated moving sideways in the short run. In the longer timeframe all 3 looked strong.

The week played out with Gold choosing the path lower while Crude Oil started lower but then recovered, finishing almost unchanged. The US Dollar found support at 100 and clung there while Treasuries tried to move higher Monday and then gave that move back and more later in the week. The Shanghai Composite bounced ending the week at the high while Emerging Markets started the week moving higher but then met some resistance and consolidated.

Volatility dropped to levels not seem in over 2 and a half years and held there. The Equity Index ETF’s pushed higher early in the week, with the SPY and QQQ making new all-time highs. By the end of the week they ran out of gas then stalled, with the IWM drifting lower. What does this mean for the coming week? Lets look at some charts.

Gold Daily, $GC_FGold Weekly, $GC_F

Gold entered the week stalling at resistance and instead of consolidating it pulled back. It found support at the 50 day SMA and prior support and ended the week there. A down week but not really out of a sideways range. The daily chart shows the RSI pulling back to the mid line and the MACD about to cross down. These support more downside. On the weekly chart the shiny metal rock printed a red candle following last week’s long upper shadow, confirming a down move. The RSI is turning back prior to the mid line while the MACD is trying to cross up. There is support at 1185 and 1145 followed by 1100. Resistance comes at 1200 and 1215 followed by 1245 and 1278. Downward Bias.

Crude Oil spent another week tightening its grip on what was resistance since May. The Bollinger Bands® on the daily chart are squeezing in as the RSI hovers above the mid line in the bullish zone and the MACD is leveling after a pullback. The weekly chart shows the 7th straight week of small body candles consolidating over the break out level. It also shows the Bollinger Bands pointed higher and the RSI in the bullish zone, with the MACD leveling. There is resistance at 54 and 56 followed by 60. Support lower comes at 51.50 and 50 followed by 48. Continued Consolidation.

US Dollar Index Daily, $DX_FUS Dollar Index Weekly, $DX_F

The US Dollar Index entered the week in a downtrend and continued that. By Thursday it had hit 100, the round number, and bounced there, closing the week right at the breakout point of the 2 year channel. The daily chart shows the RSI held at the lower bound of the bullish zone while the MACD continues lower but is turning. On the weekly chart the retest of the breakout is clear with the 20 week (100 day) SMA rising to meet it. The RSI on this timeframe is bullish but falling while the MACD is crossed down. These suggest more downside below 100 could cascade lower. For now though there is support at 100.40 and 100 followed by 99 and 98.30. Resistance comes at 101.50 and 103 followed by 104. Watching for Support in Pullback.

US Treasuries started the week with a move to the upside off of the 20 day SMA. But that lasted just one day before turning back lower and ending the week lower. The short term downtrend remains intact. The daily chart shows the RSI drifting lower with the MACD flat at zero. On the weekly chart this truly looks like a Dead Cat Bounce now. The RSI is dropping back in the bearish zone while the MACD is coming into a kiss of the signal line and negative. There is support at 118.20 and 115.50, with a Measured move lower to 95, yikes! Resistance higher stands at 120.25 and 122 followed by 124.25. Continued Downtrend.

The Shanghai Composite stared the week by moving higher back over its 20 day SMA, and kept going. It ended the shortened week at the high and near resistance. The daily chart shows the RSI pushed up through the mid line and approaching the bullish zone, over 60, while the MACD is gently rising. On the weekly timeframe the RSI is holding over the mid line on a pullback, and bullish, with the MACD flat. The Composite remains stuck under resistance but in the upward channel. There is resistance at 3160 and 3280 followed by 3360. Support lower comes at 3100 and 3000 followed by 2920. Continued Drift Higher.

Emerging Markets had just confirmed a double bottom the prior week as it moved over the 100 day SMA. It continued the move higher to start the week but stalled as it hit the upper Bollinger Bands® Wednesday. it consolidated there the rest of the week. As it does the RSI is pulling back from an over bought condition while the MACD continues higher. This signals digestion. On the weekly front the trend resumes higher. The RSI is rising in the bullish zone with the MACD crossing up. The 200 week SMA sits over head as the next potential stall point. There is resistance at 38 and 38.90 followed by 40. Support lower comes at 37 and 36 followed by 35.30 and 34.40. Continued Move Higher.

VIX Daily, $VIXVIX Weekly, $VIX

The Volatility Index goes back to 1990 and has only seen levels lower than the current ones in early 2007 and 1993. The daily chart shows technically no reason for it not to continue lower. The RSI is falling and bearish while the MACD is crossed down and falling. The weekly chart is similar with the RSI falling and the MACD moving lower as well. Remember though this is an Index bounded between 0 and 100 so it is very difficult for it to move much lower. There is support at 10. resistance comes at 11.50 and 12.40 followed by 15.67 and 18. Continued Abnormally Low Volatility.

SPY Daily, $SPYSPY Weekly, $SPY

The SPY came into the week after 12 trading days of small body candles holding over the 20 day SMA. And Monday was not any different, another small body candle. But Tuesday saw strength and a move to the upside to the top of the longer consolidation range. Wednesday gapped higher to a new all-time high, but out of the Bollinger Bands®.

An inside doji Thursday was confirmed lower Friday but also remained inside the Wednesday candle, with the SPY moving back inside the Bollinger Bands. They are opening to the upside, a positive, but not much going on. The RSI on the daily chart is in the bullish range but retracing the jump Wednesday, while the MACD has crossed up. Bullish but without much conviction on this timeframe.

Moving to the weekly chart looks much more positive. A break of the consolidation to the upside, establishing a target on a Measured Move to 242, with the Bollinger Bands expanding. The RSI on this timeframe is bullish and rising while the MACD is moving higher. There is resistance at 229.70 and then free air above. Support lower comes at 228 and 226.50 followed by 225 and 224 then 221.75. Uptrend Resumes.

IWM Daily, $IWMIWM Weekly, $IWM

The IWM came into the week in a channel comprising a 6 week bull flag. It also continued but broke the flag to the upside Wednesday. It retested but held over the flag the rest of the week. The RSI on the daily chart is in the bullish range while the MACD has crossed up, both supporting more upside. The IWM failed to make a new all-time high though. Bullish but without much conviction on this timeframe.

The weekly chart is less convincing of a flag break. The RSI on this timeframe is bullish while the MACD is rolling over. There is resistance at 137.50 and 138.50 with a Measured Move to 141 above that. Support lower comes at 135 and 134.50 followed by 131.80. Bull Flag in Uptrend.

QQQ Daily, $QQQQQQ Weekly, $QQQ

The QQQ came into the week on a tear to the upside, having made several new all-time highs the prior 3 weeks. Monday started slowly but was a new all-time high. It started higher Tuesday and made another one. Then Wednesday sand Thursday were also all-time high closes. A full week of all-times with another Friday. The RSI on the daily chart is in the bullish range and overbought, but it is moving sideways now. The MACD continues higher. Strong conviction on this one.

The weekly chart is also strong. A long body candle shows added strength but also a move out of the Bollinger Bands. It may need to pause next week or retrace. The RSI on this timeframe is bullish and rising while the MACD is moving higher. There is no resistance above, with a Measured Move giving a target to 130. Support lower comes at 125 and 124.30 followed by 123.50 and 122. Continued Uptrend.

Heading into February the Equity markets continue to look strong, especially on the intermediate charts. Elsewhere look for Gold to continue lower while Crude Oil churns over support. The US Dollar Index continues lower but may be bottoming while US Treasuries are biased lower. The Shanghai Composite is resuming its drift higher, but will be closed until Friday while Emerging Markets work higher.

Volatility looks to remain at abnormally low levels keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts show real strength continuing in the intermediate term. Shorter term the QQQ has been the leader but is getting a bit overheated, while the SPY and IWM may be ready to start higher out of consolidation. Use this information as you prepare for the coming week and trad’em well.

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